It was one of the biggest and most highly anticipated stock offerings in U.S. financial history. Now it looks to many people like Wall Street’s biggest disappointment.

Shares in the social media company Facebook have been steadily losing value since the company’s May 18 public debut, when its market value was estimated at an eye-popping $104 billion. Since then, the share price has dropped 25 percent from an initial $38. The stock closed at $29.60 on May 31.

It wasn't supposed to happen like this.

Investors lucky enough to get their hands on Facebook stock thought they were buying a sure thing. The excitement leading up to its initial public offering (IPO) was unmatched in the history of Wall Street. Facebook fever gripped everyone from the largest investment bank to the smallest individual investor, all of whom wanted to own a piece of the wildly popular social media company founded by Mark Zuckerberg at Harvard eight years ago.

It worked. The company raised $16 billion. So what’s gone wrong since then?

'Put To The Test'

“It was a combination of things that disappointed the market," says Peter Cardello, chief market economist at Rockwell Global Capital, "and as a result, the price came under selling pressures and is continuing to be trashed and put to the test.”

Like many other financial analysts, Cardello points to three factors that led to a “messy launch” for Facebook.

First, just moments after guest of honor Zuckerberg rang the opening bell for the NASDAQ to signal the start of the trading day, the stock exchange’s computer system experienced a rare technical glitch that delayed trading. It was quickly fixed, but it cast a shadow over the market’s jubilant mood.

Second, reports have surfaced that an analyst at one of the banks handling the stock offering had lowered his financial forecast for the company shortly before its public launch. People with inside knowledge say it was because Facebook executives expressed uncertainty about whether their ad-based revenue model would work well on mobile devices, which an increasing number of Facebook's nearly 1 billion users rely on.

Allegedly, the bank – Morgan Stanley -- chose to tell this to only a few of its major clients and not the public. Those new numbers made some institutions nervous enough to reduce their planned buy orders.

And third, the massive public demand for Facebook shares resulted in an oversupply of stock flooding the market. Institutional investors who had scrambled to get their purchase orders in early were annoyed that more shares were available than they were led to believe would be, and felt they had paid too much.

'Without Merit'

Two groups of shareholders have already filed suit against Facebook and its bankers, alleging that the company and its financial backers -- Goldman Sachs, JP Morgan, and Barclay's Capital -- misled investors about the company's value and told only big clients the truth.

Facebook says the lawsuits are "without merit."

Rockwell Global’s Cardello says that if the allegations are true, laws may have been broken. Federal regulators are already investigating.

“Selective dissemination of news is a no-no," Cardello says. "And unfortunately, it happens from time to time. And when it does happen, it certainly leaves a sour taste in the mouth of the small investors. There are fair disclosure rules, and of course this is going to be scrutinized in the days and months ahead. Everyone should have a fair shake at [financial information].”

The Facebook fail, as some are calling it, has had a chilling effect on other tech startups planning their own IPOs.

The Russian-based social network Vkontake announced this week that it has postponed its planned public offering because of Facebook’s stumble. In a message posted on Twitter, chief executive Pavel Durov said Facebook's IPO "has destroyed the faith of a lot of private investors in social networks" and that the Russian firm's offering "has now been postponed indefinitely."

So has that of the travel website Kayak, which postponed an IPO many were expecting at the end of May. The company says it’s waiting for “market conditions to meet [its] requirements.”

Despite the early disappointment, Facebook stock isn’t necessarily looking like a bad bet.

Top analysts like Michael Pachter of Wedbush Securities think its stock will rally over the next 12 months. He told Bloomberg Radio this week that Facebook's business “fundamentals” are solid and that the stock slide is a result of misjudgment of demand. Wedbush has told its clients that it expects “dramatic long-term revenue growth.”

There is precedent for a highly anticipated tech stock plunging before soaring. Share prices of the giant online retailer Amazon fell hard after its public launch in May 1997. A year later, its $18 initial offer price had quadrupled. Amazon shares now sell for more than $200.